AXIS Capital receives negative ratings outlook

Reinsurer’s bumpy road ahead reflects reinsurance sector trend, says credit ratings giant

AXIS Capital receives negative ratings outlook

Insurance News

By Gabriel Olano

International ratings agency Fitch has revised its outlook on global re/insurance company AXIS Capital Holdings, amid huge catastrophe losses recently. The firm’s insurer financial strength rating remained at ‘A+’, while its issuer default rating was also unmoved at ‘A-‘.

The report released by Fitch cited declining capital adequacy, adverse earnings trends, sensitivity to changes in loss estimates, and US$578 million in after-tax losses. These factors highlight a negative trend in the Bermuda-based reinsurer’s underlying earnings, which put pressure on its ratings.

From historically scoring “very strong” on Fitch’s capital model test, AXIS Capital’s score declined to “strong”. The result reflects the company’s lost equity following recent catastrophe loss events, as well as adjustments from its recent acquisition of UK-based insurer Novae Group.

On a brighter note, Fitch noted that the losses AXIS sustained from the hurricanes Harvey and Irma were lower than its one-in-50-year expected losses. In order to recover capital, AXIS Capital has suspended its share repurchase programs.

Fitch’s negative outlook on AXIS is in line with its general outlook on the reinsurance sector, citing the deterioration of reinsurance fundamentals with declining premium pricing and weakening of terms and conditions, particularly for property catastrophe risk. It added that it could lead to consolidation in the reinsurance sector as companies seek to improve their relative competitive positions.

Related stories:
AXIS names Steve Arora as CEO for reinsurance
AXIS Capital-Novae deal finally complete
Global insurers will raise rates, say investors

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